Though this is a timely bonanza for the government, the ECF review has turned out to be potentially mush less rewarding for it than many analysts thought and some of the government managers clamoured for.
A day after the Reserve Bank of India (RBI) decided to transfer the highest-ever amount of Rs 1.76 lakh crore to the Centre from its reserves for the central bank’s financial year 2018-19 (July-June), including Rs 52,637 crore of ‘excess provisions’ identified as per the Bimal Jalan committee formula, finance minister Nirmala Sitharaman on Tuesday ridiculed the Congress allegation of “stealing RBI’s reserves” and said questioning the RBI’s credibility was a “worrying” sign.
Pointing out that the committee which reviewed the RBI’s economic capital framework was constituted by the central bank itself, the minister said the panel had eminent people on it and met several times before arriving at the formula for surplus transfer. Allegations
against RBI and the panel were “a bit outlandish”, Sitharaman said.
Following Monday’s decision, RBI has already transferred Rs 1.48 lakh crore to the Consolidated Fund of India (Rs 28,000 crore was transferred as advance in February).
Though this is a timely bonanza for the government, the ECF review has turned out to be potentially mush less rewarding for it than many analysts thought and some of the government managers clamoured for. This is because the panel stuck to the view that RBI’s gold and currency revaluation balances being notional and unrealised gains are not distributable.
The panel said RBI’s new surplus distribution policy would now target the level of realised equity to be maintained by it within the overall economic capital level, rather than just economic capital.
Congress leader Rahul Gandhi earlier in the day hit out at the government over the record cash transfer from the RBI, saying the prime minister and the finance minister were “clueless” about solving the “self-created economic disaster” and accused them of “stealing money” from the central bank.
“The Congress should have consulted its finance ministers and seniors before making these allegations regarding the RBI. Yet, they have become consummate in making such allegations of stealing and I do not want to pay much heed to this,” Sitharaman said here on the sidelines of meeting with taxpayers. On how the government planned to use these funds, the FM said she couldn’t say anything now as it was not decided.
At the time of the constitution of the Jalan panel, former chief economic advisor Arvind Subramanian had said the money should be used for specific purposes like bank recapitalisation.
The excess capital was one of the key issues which had led to the resignation of former governor Urjit Patel in December, and his deputy Viral Acharya in last month, had voiced concerns on the government raiding the balance sheet of the central bank.
Pune was the fourth tier-2 city that the Sitharaman has visited in the last few days, which is seen as an effort to assure taxpayers that tax department would not ‘overreach’ to shore up revenue collections. She had held similar meeting earlier in Ahmedabad, Varanasi, and Mysore with tours to Guwahati and Kanpur scheduled in the next few days.
On the revenue front, the government is now on track to meet the GST targets that was revised in the full Budget. Its current run rate is Rs 1.02 lakh crore a month compared with the target of about Rs 1 lakh crore. However, the direct tax collection is worryingly off the mark with the growth rate April-June period clocking only 9.7% compared to 17.4% required to reach budget estimate. The government has estimated direct tax mop-up of Rs 13.35 lakh crore in the current fiscal, up from Rs 11.37 lakh crore of actual collection in FY19. (With PTI inputs)